Adriel Hampton
San Francisco Examiner
Thursday, September 11, 2003
PG&E felt some heat Tuesday in San Francisco, when consumer advocates, the city attorney and mayoral candidate Angela Alioto opposed the utility's pending bankruptcy settlement. Alioto promises a publicly owned gas and electric company within 90 days if elected mayor.
PG&E's big guns wasted no time shooting down the challenges, accusing the consumer advocates of Enron-style "fuzzy math" and pointing out that voters have rejected public power proposals "more times than Ms. Alioto has run for mayor (three)," said the energy giant's spokesperson Paul Moreno.
With PG&E saying it will budge from a mediated bankruptcy settlement announced this summer after more than two years in court, hearings begin today before the California Public Utilities Commission, which will vote in December on the settlement or any alternate proposals; an administrative law judge rules on the mediated settlement in November.
San Francisco-based The Utility Reform Network (TURN), City Attorney Dennis Herrera, cement-maker Earl Bouse of the California Large Energy Consumers Alliance and representatives of Consumers Union and Aglet Consumer Alliance are asking the PUC to support modifications to the bankruptcy bailout. TURN claims the modifications could save ratepayers nearly $3 billion over the deal's nine-year life without jeopardizing the utility.
"We are here because we don't believe that a bankrupt corporation should use bankruptcy provisions to emerge with a windfall profit," executive TURN director Nettie Hoge said at a press conference.
PG&E representative Ron Low called the numbers "phony" and said increased financing costs under TURN's plan would cost more than $1.5 billion and drown out what the utility's experts estimate as a $400 million savings.
"They use fuzzy math to help them achieve a number that sounds good," Low said. "They've used slick financial accounting to help them achieve a higher number."
PG&E sent a representative to the press conference with a list of questions for TURN, pointing out that two of its expert witnesses have experience with energy firms found culpable for deregulation failures.
Hoge called the charges "utter b.s." and said PG&E is avoiding discussions of content because it wants to facilitate a smooth transfer of wealth to stockholders. She also accused PG&E lobbyists of doing "everything but breaking knuckles" at the statehouse to keep legislators from supporting TURN's plan.
"Ladies and gentlemen, the green light is up for greedfest," she said.
If the PUC approves the bailout, PG&E is confident it can emerge from bankruptcy court by early next year with a blue chip credit rating that will make it easier to raise $7.7 billion to repay its creditors. The utility's credit rating has been stuck at the junk level since soaring wholesale electricity prices in 2000 and 2001 depleted PG&E's accounts. State regulators subsequently raised consumer electricity rates to help the company recoup its losses.
The bailout entitles PG&E to keep up to $4 billion accumulated through excess rates during the past three years, and pocket up to $5.3 billion more through 2012.
In return, PG&E will drop various lawsuits against the PUC, abandon an effort to break away from state regulation and protect 140,000 acres of San Luis Obispo watershed the company values at $300 million.
By continuing to charge customers far more than the true cost of electricity, the bailout will diminish the profits of big power users such as Hanson Permanente Cement, where Bouse oversees manufacturing.
"Why should we have to bail out PG&E?" Bouse said. "If my business went bankrupt, I doubt anyone else would be coming to my rescue."
PG&E stopped paying shareholder dividends in January 2001 and can't restore the payments until July 2004, at the earliest. By then, PG&E says its shareholders will have missed out on more than $2 billion in suspended dividend payouts. But the bailout is expected to enable PG&E to pay higher future dividends. Critics say its excellent stock performance shows the utility is getting a sweetheart deal.
The Associated Press contributed to this report.